Company as trustee for Discretionary Trust

I just came across this forum and saw similar line of questions so hope this is relevant.

Through an accountant I recently registered a new company, Company Pty Ltd, and formed a family trust for which Company Pty Ltd is trustee. To save a few dollars I thought to do the registering for an ABN, TFN and business name myself. But now I have ended up scratching my head quite a bit and doubting how it all works.

This company/trust structure was set up in order to limit liability when trading as a business, as well as the tax benefits it brings. I wish to just run by my understanding by other knowledgeable people and ensure I understand things correctly.

I understand in this structure, that the company is not meant to trade. It's purpose is solely to act as trustee of the trust. The trust on the other hand will be doing business as "Company Pty Ltd as trustee of Family Trust" and so it would be a trading trust.

Thus, I register the trust for a TFN and ABN and the business name that the trust will be trading under. The company needs neither TFN or ABN since it won't be getting money or trading as a business. Am I understanding this all correctly?

It is just that when filling out the forms I begin getting confused. For example, during the TFN/ABN registration process where it asked the name of the trust, it already had "As trustee of" and I just appended "Family Trust" to the end (although in retrospect I believe I should have put "Company Pty Ltd as trustee of Family Trust"???). The form than went on and made it mandatory for me to provide my own name and tick a box "Trustee" for my title. I thought, this seems wrong since I am not the trustee but rather Company Pty Ltd. However, I was also able to associate my Company Pty Ltd as a trustee so some reassurance there...

Then it came time to registering the business name in my state. As the trust does the trading I needed to add the trading name to the trust. However, under the Proprietors section, it only has fields for individuals and companies and ACN is a requirement. There is nowhere to put the name "Family Trust"... so at the end of the day I intend to write "Company Pty Ltd in its capacity as trustee for Family Trust" and provide my company ACN. I presume this would be near correct, but all this uncertainty makes me doubt as to whether I correctly understand the business structure.

Am I understanding the relationship between the company and trust wrong in that the trust does the trading and company just a trustee?

I will likely shell out the money to see an accountant and just get a better understanding, but thought I would try my luck here first. So any help would be greatly appreciated.

Thanks!

 

Hi Kurieuo,

I think you understand the structure correctly - but you have just stuffed up the ABN / TFN application for the trust.

If you completed the application you would have got a huge long 16-20 digit reference number.

Call the ATO registrations area with this reference number and they should be able to fix it all up over the phone if you explain the structure - they handle hundreds of these per day so they should be able to get it sorted.

You have the right idea regarding the business name.

The general gist of the structure is that the trust doesn't have what is called its own legal 'personality' whereas an individual and company do. Think of the company as a new legal person who you control, and the trust as simply a flexible structure used for tax purposes.

By the way the state based business names are a waste of time and offer absolutely no protection to your business name or intellectual property - it is merely an administrative rort by state governments to gouge extra revenue for giving you a piece of paper which is worthless.

For proper legal protection you need to trademark your name - but that subject is a little off topic.

I am involved in giving a lot of advice to clients regarding structuring and have had additional training by quality solicitors in these areas and understand them better than most other accountants and advisers.

The service my company offers is a little more expensive but we do all the ABN / TFN rego's and provide advice and education regarding how the structure works. It is not for everyone however we can't compete on price when it comes to the set up of companies and trust so we differentiate via a higher-level service offering and a bit of extra hand-holding and educational advice.

Sorry for the self promotion!

Good luck getting it sorted - should work out fine.

SM

 

Thanks SM for reading my long message and responding in kind.

I will call ATO first thing tomorrow. Just so I know exactly what to correct with the GST/TFN application for the trust, the entity should have been "Company Pty Ltd as trustee for Family Trust" shouldn't it?

It is quite confusing when first trying to understand how the trust works and how it isn't considered a legal entity in its own right. But I think you have helped the penny to drop. I was receiving conflicting advice also re: the business structure my accountant left me with, so its good to have further reassurance I had the general gist of things.

Also thanks for the tip on the trademark, I will definitely look into this. Re: business name registration, I think it dodgy that you can't trade in the name of your company without Ltd Pty. But what can you do? I don't want to be advertising "Company Pty Ltd as trustee for Family Trust" everywhere. Far too long.

Don't worry about the self promotion. I'll definitely keep you in mind in the future!

Many thanks!

 

Just the Trust for ABN / TFN / GST purposes.

 

Called ATO up yesterday and got it sorted. They didn't seem too concerned by it and they issued my ABN on the spot which is good to have now.

Thanks.

 

Advice please

Hi kurieuo

I think the same thing happen to me , I am getting worried now as I am applying for my business name, I put the Abn of my trust and when I read the details I noticed ? the trustee for .... ( my family trust ) , there is no where that says my company name . I noticed that too that on the ABN application " the trustee for .. " was already written and I completed it by putting my family trust details .

Could you please advise me if I need to correct it by calling ato ? Did I do it wrong too?

Thank you

 

are you sure this is what your accountant wanted? as I read your post I thought company Pty Ltd will be doing the business and trust will be a shareholder in it thus receiving the dividend or profits.

 

Hi Kuireuo

Wot a mess!
In the ABN application you should designate the name of the trust i.e. KUIREUO Family Trust and then the details of your company trustee - you cannot use a Bus. Name for this you need a company.
You may also need a second company - a "Bucket Company" or corporate beneficiary to keep tax at or below 30% plus personal beneficiaries so you can divide income in a tax effective way.
Good Luck
AnthonyKing